Dissecting the Bull

AMD new post

2013-05-20T10:03:00.000-07:00

My newest post is at SeekingAlpha:

AMD Game Console Triple Crown: Will there be Profits

There is already a great discussion going on this article and the prospects of AMD and Intel (INTC)

Dot Hill Outlook and Change to Seeking Alpha

2013-05-14T16:52:00.000-07:00

In the past I have posted articles here. Seeking Alpha has reposted some, but not all of my articles.

Because so many more people are viewing the articles at Seeking Alpha than here, I am now posting the articles first at Seeking Alpha. I will post a link to the Seeking Alpha articles here.

Articles not appropriate for Seeking Alpha will continue to appear here.

Here's my first link:

Dot Hill Sees 2013 Revenue Ramp And Profitability

To see all my articles:

William Meyers at SeekingAlpha.com

Keep diversified!

Biogen Idec Too High Too Fast?

2013-04-30T11:54:00.000-07:00

Biogen Idec (BIIB) is now off its 52-week high of $226.18 (reached earlier today) but up from a 52 week low of $126.39 (of June 4, 2012). At $218.84 it has risen 73% off the low.

I began following BIIB in the first quarter of 2006, but did not acquire stock until February 2008, when I picked it up at $61.57 per share. In the short run I overpaid, but I picked up more later that year at $46.97. I person with perfect timing could have picked up shares at $40.27 on November 28, 2008. Biogen then rose to $67.05 by the end of 2010, and looks like it invented an anti-gravity machine this January.

Biogen did so well that it became too large a percentage of my portfolio (according to my portfolio rules) so I sold half of my position on May 16, 2012 for $137.19. Now of course I wish I had violated my portfolio rules and kept the stock longer, but I had other situations where those same rules kept me out of major trouble (they were the main reason I sold most of my Dendreon stake before the price collapsed).

Even though my remaining Biogen stake is well within my portfolio rules I have to ask: is BIIB overpriced? Should I sell it and look for a better value proposition?

There were reasons Biogen was priced where it was in 2008 through 2010, the big one being a disease called PML (progressive multifocal leukoencephalopathy) caused by the JVC virus. Biogen's specialty is multiple sclerosis MS therapies. Its Avonex was the most prescribed MS therapy, but the new wonder drug was supposed to be Tysabri. MS is an autoimmune disease; MS therapies work by selectively suppressing the immune system. Turned out, the JVC virus lurks in the brains of about 1/2 the population, generally doing no harm except when the immune system collapses, when it causes PML, and often results in death.

Tysabri use led to some PML cases, and in a few instances to death. Not knowing what the rate was, nor what treatment could be given for PML, the FDA revoked Tysabri's marketing license. The immediate solution turned out to be to monitor for PML and stop giving Tysabri if there were symptoms. The FDA re-approved Tysabri provided a monitoring program was in place. While Tysabri was so effective that sales ramped back up substantially, naturally there was concern by doctors, patients, and investors that we might see more PML deaths and a permanent ban on Tysabri.

Nevertheless in Q1 2008 Tysabri sales were $115 million, total Biogen revenue was $942 million, and GAAP EPS was $0.54. It being the recession, investors were risk-adverse, and it seemed no amount of good news on Tysabri, revenue, or profit could do much for the stock until late 2010.

So much of the run up in the price was just investors catching up to the new reality: a highly-profitable biotechnology company with a strong pipeline of potential future blockbusters. But in the same way investors lagged reality before 2011, perhaps so many momentum players have jumped on the BIIB bandwagon that the stock has gotten ahead of its fair valuation.

By the beginning of 2013 we had pre-screening for JVC and better treatments for PML, reducing the risk of PML mortality to statistically close to zero. We have substantial Fampyra revenues, though that therapy had also had its issues.

Plegridy (peginterferon beta-1a) for relapsing MS pivotal Phase III data has met all primary and secondary endpoints after 1 year cutoff of a two-year study. Biogen expects to file with FDA and EMA (Europe) by mid-2013

Daclizumab-HYP Phase III data readout expected in 2014. It is also for relapsing forms of MS.

Biogen also filed for approval with FDA for Hemophilia Factor 8 for A and 9 for B, based on significant Phase III trial results.

A number of other therapies are in Phase I, II, or III trials. See the Biogen-Idec product pipeline for more details.

So we can figure that the most likely scenario is that Biogen Idec will see substantial revenue and profit growth over the next few years and new therapies come to market. It is unlikely that everything in the pipeline will get good results and FDA approval, but Biogen has a lot of shots on goal.

You can build spreadsheets (and I have, and sell-side analysts certainly do) guessing at revenue and profits from future therapies based on patient populations, competing therapies, and guesses about pricing. But experienced pharmacology and biotechnology investors know that promising therapies often fail, and unexpected side effects can show up even after FDA approval. Picking winners of competitive races is also more guesswork than science.

So a good hard look at the latest quarter should keep us anchored in reality, and then some P/E ratio points can be added to reflect optimism about profit growth in the next few years; add as many points as you are comfortable with.

Biogen reported on the first quarter of 2013 last Thursday. Revenue of $1.415 billion was up 9.5% from Q1 2012, which is quite good and means a fair P/E ratio should be above the market average. GAAP EPS was $1.79, up 43% y/y; now that should be worth some a P/E ratio well above market. Ballpark it at 30 to 1.

Guidance is for 2013 GAAP EPS of $6.69 to $6.90. Given that non-GAAP guidance is $7.80 to $7.90, let's use $7.00 and multiply by 30. That gives us $210 per share, not much off today's auction price.

So my ballpark estimation is that even at this price BIIB is still a good value. Included in the price are estimated 2013 profits. The pipeline of new drugs revenue and profits won't kick in substantially until 2014. I would expect BIIB to end 2014 in a higher price band, depending on the details of new product ramps.

I am inclined to hold my BIIB and, if I need to sell stock because I spot another opportunity as good as Biogen was in 2008, I could probably find something else to sell. Most likely I will leave BIIB off the leash until it again becomes a risk management problem from being too large a percentage of my portfolio. If I am wrong and it falls in the short run, or becomes a smaller percentage of my portfolio again because something else runs up, I might even buy more.

Keep diversified!

Disclaimer: I own share of BIIB and reserve the right to sell them or buy more at any time, even though I currently have no plans to change my position.

See also:

My Biogen Idec main analyst conferences page.
My BIIB Q1 2013 conference notes
www.biogenidec.com

Applied Materials, Process Nodes, and Future Profits

2013-04-22T14:58:00.000-07:00

Applied Materials (AMAT) makes capital equipment for semiconductor chip manufacturing. Demand in that sector has not been robust these last couple of years, although it has come off the bottom that lagged after the recession. This article will look at AMAT as a long-term investment, not a short term trade. Given that, the first thing to note is that it pays a dividend, which is currently $0.10 per quarter, or 3.1% per year at the current $13.06 stock price.

I believe the largest factor determining future AMAT revenue and profit will be the ongoing trend towards new, small process nodes (indicated by the size of the lines used to put transistors in chips. 32 nanometer is older than 28 nm.) But let's start with where we are now.

AMAT last reported on February 13 for the first fiscal fiscal quarter of 2013, which ended January 28, 2013. Against an overall global semiconductor capital equipment spending drop of 16% in 2012, AMAT reported revenues of $1.57 billion, down 5% sequentially from $1.65 billion and down 28% from $2.19 billion in the year-earlier quarter. That is discouraging, for certain.

Applied's core semiconductor equipment business saw a Q1 y/y decline to $969 million from $1.34 billion, a decline of 28%. Its display screen segment did better, but the solar segment did worse. Display revenue dropped 17% y/y to $87 million from $104 million, which was already low by historic standards. Solar revenue dropped 77% y/y to $47 million from $206 million. There is a glut of solar supply in the market, so no turn around is expected until at least 2015. Display may see some rebound in 2013 as screen sizes start to increase in developing markets and new screen technologies are adapted.

The bulk of Applied's revenue and profit comes from the semiconductor segment. It is well known that demand for PCs has been down, and it is hard to predict where the bottom may lay. Demand for tablets and smartphones has been increasing. Overall demand is dampened because smartphones simply contain far less silicon than PC's do. They have weaker processing chips and far less memory.

Does that mean Applied and other semiconductor equipment manufacturers should be written off as dinosaurs? I think not. I think overall computational demand will continue to increase rapidly for at least the next two decades. To cram more computation into portable devices (and the computers in the cloud that serve those devices) the industry will continue to move to smaller process nodes.

Right now demand is still high at the 28 nm node. Most chips, which work in legacy, non-mobile applications, are still made at much older nodes. For high-end graphics chips from AMD and NVIDIA, 28 nm is the cutting edge. Intel is already manufacturing its newest CPUs at 20 nm, and new memory-chip production at Samsung is just started at 10 nm. Memory process nodes typically can be smaller than computing process nodes. The most advanced ARM-based chips were recently taped out at 16 nm at TSMC.

Smaller (newer) process nodes mean that more capability can be built into mobile devices (and also non-mobile devices). Transitions to 14 nm and 20 nm are almost entirely ahead of the industry. To some extent moving to these nodes may open up capacity at 28 nm, but there is a lot of technology out there that has yet to migrate to 28 nm.

The other factor is overall demand, and that depends on the global economy and the frequency of consumer upgrades. There is a lot of old equipment out there, as seen by the high percentage of PCs still running Windows XP. With the exception on Intel, Samsung, IBM, and a few others, most chip makers are now really chip designers who send their designs to foundries like TSMC and Globalfoundries for actual production. These foundries don't want to have capital equipment sitting idle, but neither do they want to lose business because of insufficient capacity.

Generally capacity has been lean since the recession, which is one reason why there has been a shortage of 28 nm capacity. The other reason 28 nm has been tight is it was harder to get it working with good yields than had been expected There is quite a bit of impatience right now among the more cutting-edge designers because of a lack of sub-28 nm capacity.

Anything under 28 nm is far more expensive to make than 28 nm. Only Intel and Samsung have had the vast capital resources to simply move to the lower nodes without concern about how much demand would be there at startup. Even Intel announced it was cutting back capital equipment spending by $1 billion in 2013 due to lower demand projections.

But what is bad for foundries is good for AMAT and other equipment manufacturers: future nodes will require far more spending on capital equipment. One reason is that some 20 nm chips will have a 3-D structure. This means a move away from lithography defined shrinking to process-defined, where with precision engineering AMAT claims a considerable advantage.

In addition to reporting revenue, AMAT reports orders for each quarter. The good news for Q1 was that orders of $2.11 billion were well above revenue and up 31% from orders in Q4, as well as up 5% y/y.

Guidance is for Q2 fiscal 2013 revenue to be up 15 to 25% sequentially. Non-GAAP EPS is expected between $0.09 and $0.15.

While Applied Materials has substantial competition in each of the types of tools that are needed for semiconductor manufacturing, it is second in overall sales revenue only to ASML in an industry where scale matters. ASML is not much bigger: it had sales of $7.9 billion in 2011, AMAT had $7.4 billion. Another American competitor is KLA-Tencor, which had $3.1 billion in sales, placing it fourth globally.

On the whole, I think it is likely that 2013 will be a year of improvement for AMAT, and with major gearing up for 20 nm in 2014, that will be a very good year. How much improvement depends on the degree of strengthening global demand for semiconductor chips.

Disclaimer: I am a long-term investor in AMAT. I also am long AMD, but do not own any other company mentioned in this article. I will not buy or sell AMAT stock for one week following this article's publication date.

See also:

My main AMAT analyst conferences page.

My Q1 2013 AMAT analyst conference notes

www.appliedmaterials.com

Provenge Could Be Combined with Other Prostate Cancer Therapies

2013-04-13T11:55:00.002-07:00

Provenge is the only immune therapy approved by the FDA for the treatment of prostate cancer. It is an expensive treatment, about $100,000 per patient, and it is only approved for asymptomatic or minimally symptomatic metastatic castrate resistant (hormone refractory) prostate cancer. In other words, once prostate cancer has become both malignant and keeps growing despite testosterone being artificially lowered, and before it has become painful.

According to its Seattle-based maker Dendreon (DNDN) , Provenge will "jumpstart your immune system to fight advanced prostate cancer." Unfortunately some prostate cancer has its own tricks for defeating the immune system. As a result, in clinical trials, compared to untreated patients, Provenge therapy extends life by a median (50% of men don't get this much benefit, 50% get more) of 4.2 months. Some lucky men live much longer, including some who have now survived for years.

Finding out why some men don't respond well, and helping all prostate cancer patients live longer, is now a major medical science question. One group of doctors who may have an answer is led by Samir N. Khleif, MD, director or the Georgia Regent University Cancer Center. He believes there is good science indicating cyclophasphamide and CT-011 both inhibit prostate cancer's ability to circumvent both the body's natural immune system and therapies like Provenge.

A trial is planned in which men with metastatic prostate cancer will also take either or both cyclophasphamide and CT-011 along with Provenge. While this is an exciting theory, it should be emphasized that it will likely be a couple of years before the results are known. Then, most likely, the FDA would require a larger Phase III trial to be successful before approving the combined therapy. [See also Interview with Samir N. Khleif, MD in Renal & Urology News]

Prostate cancer is quite common in older men and generally is not a death sentence: In the U.S. 240,000 men are diagnosed annually, and about 30,000 die. Most prostate cancer victims die of some other cause, and it is difficult to predict which individuals will see their disease progress to being metastatic and castrate resistant. However, at that point it tends to be deadly. There is a broad debate over whether earlier interventions like surgery and radiation are overdone. Those who favor early treatment believe it cuts down on the number who progress to deadly disease. Those who oppose early treatment point to its cost, the low likelihood of progression being the cause of death in older men, and the complications from treatment (loss of control and occasional deaths from surgery.) Even lowering testosterone levels has side effects men don't like.

David Crawford, MD, is one of the growing number of physicians who believes that the answer may be in sequencing therapies for late-stage prostate cancer patients. He points out that in the last 3 years several therapies that are proven to help have finally been approved by the FDA, and more may be on the way. In addition to Provenge, we now have Zytiga which lowers testosterone more than previous drugs could, and Xtandi, which is an androgen receptor antagonist.

Doctor Crawford believes that for cancer in general multiple therapies have been more successful than single therapies. This is partly because cancers can develop defenses against therapies over time. By attacking prostate cancer at one, or in quick succession, with the newer therapies, Crawford believes patients will see better results. Trials are underway to determine if there is a preferred sequence for prostate cancer. [See Optimal Sequencing of the New Prostate Cancer Drugs in Renal & Urology News]

Currently doctors are divided into two camps. Some favor either Zytiga or Xtandi first because they act quickly to reduce hormone levels. Others favor Provenge first because the immune system acts over time and the cancer at this stage is already

The consensus in the community seems to be moving towards giving both types of therapy as soon as possible. As with Provenge, neither Zytiga nor Xtandi are cures, but instead, on a statistical basis, prolong the lives of the patients who take them. Xtandi prolongs life by a median of 5 months, slightly longer than the Provenge median.

Disclaimer: I own Dendreon (DNDN) stock and will not trade the stock for 7 days after the publication of this report.

William P. Meyers

See also: www. dendreon.com

My main Dendreon notes page.

Dot Hill Ups Guidance, Announces Quantum Parntership

2013-04-08T11:33:00.002-07:00

Dot Hill's stock price shot up today on a series of announcements about partners and future guidance, as well as holding its annual analyst day. The last 5 years have been rocky for HILL despite gradual acquisitions of new customers since in lost Sun. In 2012 Dot Hill was developing products that it said would attract new customers [See Dot Hill's 2013 Hopes]. Today was delivery day.

New guidance was given for Q1 2013, Q2 2013, full year-2013, and (tentatively) 2014.

A recap of Q4 2012 provides perspective: revenues were $44.1 million, down 6% from year earlier. Non-GAAP earnings per share (EPS) were negative $0.03, down from $0.00 year-earlier. Not a great quarter.

Prior guidance for Q1 2013 was revenue between $43 and $46 million, with a non-GAAP EPS loss between $0.02 and $0.04.

Today's guidance for Q1 (which should be pretty close, given that the quarter is over) is revenue of $44 to $45 million, narrowing but not increasing the range, with EPS as low as negative $0.02 and as high as $0.00.

$0.00 non-GAAP EPS may not seem like much to get excited about, but that includes research and development costs for new products as well as startup manufacturing costs in costs-of-goods sold. With higher revenue and flat or lower R & D costs going forward, we get to the prettier picture for the future:

Q2 2013 guidance is for revenues between $47 and $53 million, up about 12% sequentially. Non-GAAP EPS estimated range is negative $0.01 to $0.02 per share.

For the full year 2013 revenues are estimated between $205 and $227 million. Non-GAAP EPS should be positive $0.02 to $0.10. That would be great if it happens.

For the full year 2014 revenue estimates are between $231 and $301 million and non-GAAP EPS could be $0.11 to $0.40.

While such long-term predictions should be taken with a healthy spoonful of the salt of cynicism, consider the value of HILL stock if it hit the $0.40 per share top of guidance in 2014. That would likely more than restore investor confidence, so let's give a PE ratio of 15. That would bring the stock to $6 per share. As I write it is trading at $1.53. There are a lot of hoops to jump between $1.53 and $6.00, but there are some reasons to not entirely discount the top range of estimates.

The world of data storage has been evolving rapidly. HILL does not sell disk drives. It sells storage systems for small, medium, and increasingly enterprise businesses. It used to make storage systems for Sun Microsystems until Sun brought a competitor in house. It then picked up HP and NetApp as OEM clients, plus some smaller players and system integrators. Dot Hill dumped NetApp because the margins in the deal was bad, and that made its revenues slump. But all the while it used its substantial cash to develop better systems. Now we are seeing the payoff.

The big announcement today is that Quantum is selling systems, its new QX family, supplied by Dot Hill. A rep from Quantum, at today's Hill analyst conference, reviewed how Quantum has been addressing the rapidly evolving data storage market and how Hill's new products fit into the picture. The amount of data stored in the world is climbing rapidly, largely to accommodate video, full time data feeds, and the mining of big data. Verticals with particular needs to expand their disk drive farms rapidly include entertainment, government, life sciences, and resource extraction (geology). In entertainment many company are rapidly expanding their incoming video feeds, and need all that video instantly for editing and pushing out to consumers. Clients need cheap, reliable storage, and that is what Dot Hill has been developing and is now shipping.

HP, which has provided the bulk of HILL revenues these last few years, has committed to continue using Hill as a supplier of their lower-end, mass market products, the MSA line, the market share leader in its class. While no specifics were mentioned, HP indicated a product refresh is on the horizon. HP has noted Dot Hill systems value, reliability, and interoperability (ability to work with most hardware and software).

The new data storage workloads that are driving the adoption of Hills (patented) technologies are described as a randomized sequential workload. In other words, a lot of data has to be quickly available, and it is hard to predict which data will be needed. However, in a VMWare environment, the new Dot Hill systems were shown to be rock solid reliable and capable of learning about the data demands so as to increase spread over time. With SSD still expensive and tape still much cheaper (using less electricity) than disk drives, the ability to load balance between various media has become a necessity, and Dot Hill does that well.

Also notable is that Dot Hill has greatly increased its addressable market by moving to the higher-end of the data storage market. It is also bringing high-end capabilities to the midrange and even lower range business markets, which makes all of its offering attractive at their price points.

It is an exciting time to be an owner of Dot Hill, but the usual cautions apply: data storage is highly competitive, margins could be better, and the global economy is always an issue.

So keep diversified! And congratulations if you already own HILL stock.

Disclaimer: I own HILL stock. I won't trade HILL stock for at least 3 days from the first publication of this article.

See also:

My Dot Hill main page.

My Q4 2012 Dot Hill conference notes

and of course www.dothill.com

Adobe Revenue: Will Subscription Model Work?

2013-04-02T10:25:00.000-07:00

Adobe Systems (ADBE) has been adopting a new, subscription model for its software which results in a delay in recognition of revenue. Is that really the reason for its less-than-stellar revenue growth during 2012, or is the company perhaps using this story to cover other trends?

On March 19 Adobe reported revenue for the quarter ending March 1 at $1.008 billion, down 13% sequentially from $1.153 billion, and down 5% from $1.045 billion in the year-earlier quarter. Declining revenue usually results in low P/E ratios, but as I write, at a price of $43.57 per share, ADBE's trailing PE is 30.68, which is very high for a technology stock in this market.

Perhaps earnings are improving despite the revenue downtrend? No, GAAP earnings per share (EPS) were $0.13, down 70% sequentially from $0.44 and down 65% from $0.37 year-earlier. Nor were the poor earnings from strange GAAP rules; non-GAAP EPS was $0.35, down from $0.57 year-earlier.

Surely there must be some new source of revenue and profits that has impressed sell-side analysts, that must be factored into future earnings. While Adobe's Digital Marketing segment had 20% y/y revenue growth, there are no known new initiatives that account for the optimism.

So it would seem to come down to the subscription model. In the past Adobe sold its array of software products as versions available on disk. Photoshop is its best known product, but as the Internet has become the greatest driving force in our economy a variety of products to help with Web site content production and management were introduced. Software products could be bought separately, but most designers needed multiple products, and they were packaged together in Creative Suite. Despite being sold in high volumes, Creative Suite (CS) has never been cheap. The cost of buying a full license for CS depended on the exact options chosen, but let's just ballpark it at $2000.

Over time CS improved, partly just to keep up with changes in the Internet. New versions of CS were introduced about every 2 years. If you already had a full copy of CS you could buy an upgrade for, ballpark, $1000.

With the vast majority of Web designers dependent on CS, charging them $1000 every two years for upgrades was a nice source of recurring revenue. Only many designers found they could skip upgrades at least some of the time. If they had CS 3, they might skip CS 4 and buy the CS 5 upgrade. Wait too long (typically 2 full versions), and the ability to buy at the upgrade price went away.

Meanwhile, for many customers the set of DVDs used to install CS receded into history, as the software package was downloaded from the Internet instead.

In 2012 Adobe decided to push a subscription model to replace the old system. Customers can pay a monthly fee and get upgrades automatically. Better still, instead of having to wait for 6.0 to replace 4.0, the upgrades come as they are available.

However, note the impact on cash flows. Someone who was going to buy CS 6.0 for hundreds or thousands of dollars instead starts a subscription at (rates vary) $49.99 per month.

At the end of a year the subscription client will have paid $600 to Adobe. In two years they will have paid $1200, more than the cost of an upgrade. If customers stop skipping versions, in effect the subscription systems becomes a major price increase. You see other companies doing the same thing, for instance Microsoft with Office 365. The subscription service also cuts down on pirated software.

So the theory of bullish ADBE investors is that once we go through a full subscription cycle revenue will ramp. There might even be some cost of goods sold decrease from the elimination of physical media (management says that would be quite minor).

The problem with betting on this outcome is that you are also betting on the continued dominance of Adobe in making software for Web design.

A year to two years ago investors were not so confident in Adobe, and we should recall why. Apple, a long-time Adobe ally, had refused to allow Adobe's Flash product to be used on its smartphones and tablets. In addition the industry was (and still is) making a transition to a new standard, HTML5. Since then the emergence of other mobile hardware/software platforms has Balkanized the app world, meaning just creating Web pages is not longer the prime goal of developers for the Internet.

Adobe has responded well to this challenge. The new CS, at least in theory, can create Web pages and applications that work reasonably well on multiple device form factors. Being able to design once in CS and export to multiple formats (or to include code that senses the form factor and presents the page accordingly) is a big help to Web designers.

I would still be cautious about projecting out too much. Adobe is not the only company addressing the new Internet Tower of Babel that Apple created. Just for instance, Akamai provides datacenter software that can distinguish between requests from cellphones and computers and message the outgoing data automatically. Open source software that has many of the capabilities of Adobe products is available for free. While most designers, from freelancers to large enterprise design departments, find Adobe is worth the price because of its functionality, free could become more competitive in the future. In addition several proprietary competitors exist in the Web design segment.

It is hard to imagine an Internet without Adobe, but there is danger as well as opportunity in the subscription model. Adobe management is confident that adoption will go well, and that assumption seems to already be built into today's stock price.

Disclaimer: I don't have a position in Adobe and won't take one for at least one week following the initial publication of this story. I do subcontracting work for Microsoft and am long Akamai.

See also:

www.adobe.com

My main ADBE analysis page.

My Adobe March 19, 2013 conference notes

Akamai (AKAM) 2013 Outlook Bright

2013-03-12T09:53:00.000-07:00

"Some experts mutter dark warnings about the Spamularity: the global Chaos
that will ensue once the first distributed spamming engine achieves
human-equivalent sentience."—Rule 34 by Charles Stross

Akamai was one of the survivors of the original Internet bubble, and for years was characterized by the volatility of its stock price. Specializing in Internet content acceleration, over the years it became the IBM of this field. Money was being made, and so there was intense competition, and shorts sometimes heralded the fall of Akamai. AKAM always stayed a footstep or two in front of its competition. More importantly, it branched out.

Content acceleration has always been important to AKAM, but for years it has been adding other services to its repertoire. Content acceleration is a volume-driven, price sensitive business, with a record of constant declining y/y prices, much like mass-market semiconductors. Akamai's new services, notably Internet security, are also competitive, but have offered much better profit margins that should hold up at least in the near term.

So why is AKAM priced today around $34.71, well off its 52 week high of $42.52 on January 1, if well above its 52 week low of $24.90 on June 5, 2012? In the past AKAM was a playground for momentum players; it was a relatively small company, and you might see PE ratios swing wildly between say 20 and 60. Lately the stock is behaving more like IBM, more stable, with a much smaller but still impressive market cap of $6.2 billion. At the price quoted above the PE is 31.1 trailing, which is higher than most tech stocks at the moment, but easily justified by a history of growth and the outlook for 2013.

For the latest reported quarter, Q4 2012 ending December 31, Revenue was $377.9 million, up 9% sequentially from $345.3 million and up 17% from $323.7 million in the year-earlier quarter. GAAP net income was $68.3 million, up 42% sequentially from $48.2 million and up 14% from $60.1 million year-earlier.

Akamai just re-issued guidance for Q1, which this late in the quarter should be pretty reliable. Revenue is expected between $352 and $362 million. On a sequential basis that may seem disappointing, but keep in mind that Akamai gets a yearly Q4 bump from the increase in e-commerce in the quarter. Compared to year-earlier revenue of $319.4 million, we get an annual growth rate of 10% at the low end and 13% at the high end.

The dynamics of the business appear to be favoring Akamai. Cloud infrastructure revenue, rather than content acceleration, was 60% of total revenue in Q4. The security component of that was up 5x from the previous year. A major rival, AT&T, has thrown in the towel and is becoming a reseller of Akamai services, which should add substantially to revenue in the second half.

Even the underlying trend for the content acceleration business shows no sign of ebbing. Akamai was founded in 1998. It is just 15 years old. Humans in that age bracket are in an always-connected culture dominated by video and cloud services that often require data packets to be sent from a vast assortment of geographically diverse server farms. The amount of data being served will continue to increase, and Akamai essentially runs a private toll road system within the Internet for those who want the fast service that is essential to capturing customers and converting views to sales.

I like Akamai at this price. I expect it will blow through its current 52-week high some time this year as revenue and profits from the relatively new cloud security business and other new value-added cloud services ramp.

Disclaimer: I am long Akamai. I will not trade the stock for 1 week following this post.

See also: Akamai Investor Relations
My main AKAMAI analyst conferences page.
My conference notes for the Akamai Q4 2012 analyst conference

Microchip Record Revenue should be Topped in March Quarter

2013-02-08T11:57:00.000-08:00

Microchip (MCHP) yesterday reported December quarter (fiscal Q3 2013) results slightly above analysts' consensus and in line with the mid-range of its prior guidance. Normally the March quarter is seasonally down from the December quarter, but in its guidance Microchip predicted sequential revenue growth. As a result in Microchip, which closed at $33.94 before reporting results, has climbed to $36.60 so far today. Microchip's current 52 week low is $28.92, and its 52 week high is $37.50.

Part of the strong revenue results resulted from the acquisition of SMSC. The same acquisition led to charges that hit GAAP profits pretty hard, but excluding those items non-GAAP profits and free cash flow were strong.

Microchip's model involves a focus on microcontrollers and related analog functions (touch screen control, wireless, and power management), with a wide variety of parts available to meet specific customer needs. Record revenue in quarter reflected a broad-based uptick in demand across industries and geographies. Revenues were $416.0 million, up 9% sequentially from $382.3 million and up 26% from $329.2 million in the year-earlier quarter.

Guidance to March quarter revenue of between $420.2 and $432.7 million, despite the usual hit from Chinese Lunar New Year, is based both on a continuation of the underlying trend and on design wins. Quite a number of design wins were announced in 2012; these are now resulting in orders that should ramp through 2013.

Microsoft has been a reliable dividend payer. At today's price the dividend yield is 4.15%.

Normally I use GAAP profits as a baseline, but non-GAAP numbers can be more informative for the long run when GAAP is affected by acquisition charges, as was the case in calendar Q4.

GAAP net income was $10.2 million, up sequentially from negative $21.2 million and down 87% from $77.5 million year-earlier. GAAP EPS (earnings per share) were $0.05, up sequentially from negative $0.11, but down 87% from $0.38 year-earlier.

In contrast non-GAAP net income was $84.5 million, EPS was $0.41, which is an improvement on, but consistent with, prior quarters. Free cash flow was $123.2 million, of which Microchip paid $68.7 million in dividends.

Microchip is still recovering from the cautious buying and weak end demand earlier this year. Inventories were reduced in Q4 and will continue to be reduced through June. On the customer side inventories are believed to be extremely lean, which could also result in increased buying if final demand shows signs of improving with the global economy.

I first invested in Microchip in 2006, based largely on my familiarity with their microcontroller products. It has been a reliable source of dividends and appears to have a first-class management team. I would recommend the stock to almost any class of investor.

Disclaimer: I own Microchip stock. I will not trade MCHP for at least 1 week after this story is published.

See also:

www.microchip.com
My main Microchip analyst conferences page.
My Microchip February 2013 analyst call notes

Celgene (CELG) 2017 Guidance: Two Times 2013 Revenue

2013-01-26T16:09:00.000-08:00

Celgene, based in Summit, New Jersey, is a biotechnology and pharmaceutical company best known for its Revlimid therapy for multiple myeloma (MM). At its analyst call to discuss fourth quarter 2012 results, CEO Robert Hugin projected that revenue would hit $6 billion in 2013 and grow to $12 billion by 2017. He believed profits (non-GAAP EPS, earnings per share) would grow even faster, at an average of 25% per year through 2017.

Last night I heard a high-level twit on NPR's Marketplace say that he would not buy stocks at this level because they have gone up so much in the last year, and in over the years since the 2008 collapse. Would he say the same about Celgene in particular?

Celgene's stock price took a hit during and following the 2008 selloff, reaching a low of $38.33 in 2009. Here are end-of year closing prices since then:

2009: $55.68
2010: $59.43
2011: $67.60
2012: $78.47

A naive investor might think that after a run up over four years buying at $78.47 would be a very risky thing to do. But in less than a month Celgene jumped to Friday's closing price of $99.76.

This is not idle speculation. Celgene stock has risen because revenue and profits have risen. It will rise further if revenue and profits continue to rise. So the question an investor should be asking is not what the price history is, but what reasonable projections can be made about profits.

The rise of Celgene to a top-level company has been driven largely by Revlimid sales, which accounted for $1.0 billion in revenue in the fourth quarter, or 70% of overall revenue of $1.42 billion. That might indicate a risky concentration in a single drug. Drugs typically pick up competitors over time, and eventually go generic. Should we discount the value of profits coming from Revlimid?

Revlimid's original approval was not for MM, but for MDS, myelodsplastic syndromes, and it is still used for that indication. Revlimid received FDA approval for MM in 2006, so it is a relatively new drug. Revlimid revenue is projected to continue to mount for three reasons. Revlimid has not yet fully penetrated the global market for its current label, which is for second line therapy, in other words for "patients who have received at least one prior therapy." There are still nations in the process of approving the therapy, of approving reimbursement, or of ramping commercially. A bigger factor is clinical trial data suggesting that Revlimid should have its label expanded to include first line therapy, which would give it a bigger share of the MM market. The length of therapy has been increasing and should bet a good bump from the shift to first line. Longer therapy means more revenue per patient.

Yet most of the projected expansion of Celgene revenue does not come from Revlimid. Revenue in Q4 from Vidaza was $216 million; from Abraxane was $106 million; and from Thalomid was $73 million. Except for Thalomid, all these therapies should see revenue growth. Abraxane, in particular, has clinical data showing it is effective for two hard-to-treat cancers, pancreatic and melanoma, in addition to its current label for breast cancer and its recent FDA approval for non-small cell lung cancer. FDA approvals are likely some time in 2013.

Apremilast for psoriasis and psoriatic arthritis, ankylosing spondylitis, and rheumatoid arthritis will likely be a blockbuster, with good clinical data in psoriatic arthritis likely leading to FDA approval this year. and Istodax has already received FDA approval and will generate revenue in 2013. Pomalidomide is in a Phase III trial for myelofibrosis and reported good results for MM. The FDA should complete its review by February 10, 2013.

Beyond these leaders, Celgene has a potential product pipeline so deep I'll just suggest you click on the link and gape at it.

Of course, the future could hold twists we cannot foresee. Celgene's Hugin is not guaranteeing a certain level of profit for 2017, or any particular stock price.

I find Celgene's 2017 revenue and earnings guidance quite credible. Given that, the price per share in 2017 should be in the $200 to $230 dollar range, given a typical stock market with typical price-to-earnings ratios. Also assuming that in 2017 it looks like there is more growth ahead.

Celgene is in the Nasdaq 100 and S&P 500, so several index funds include it. It is in most biotechnology funds as well, for instance the Nasdaq Biotechnology Index (IBB).

Remember, no matter how good you think a single company's future look, diversified portfolios can provide much more safety while retaining a high degree of potential growth. Keep diversified!

See also:
www.celgene.com
My Celgene main analyst conferences page.
My Celgene Q4 2012 conference notes

Disclaimer: I have owned Celgene stock since 2007. I will not trade in CELG for at least 3 days from this article's publication date.

AMD sure of turnaround in 2013

2013-01-23T08:24:00.002-08:00

AMD hit revenue guidance for the final quarter of 2012, but the numbers were still dismal. Revenue was $1.16 billion, down 9% sequentially from $1.27 billion, and down 32% from $1.69 in the year-earlier quarter. Guidance is for Q1 2013 revenue to be down around another 9%. Net income was $473 million in the red on a GAAP basis, and even on a non-GAAP basis was $102 million short of break-even.

Despite that AMD CEO Rory Read were surprisingly upbeat about 2013, predicting the a return to profitability in the second half. Of course we've heard that kind of optimism from AMD before, only to be let down. Are AMD's claims of a turn-around ahead credible?

AMD is currently known for making CPUs that compete with Intel's for personal computers (notebooks and desktops) and servers. In addition AMD makes stand alone graphics chips (GPUs), competing mainly with NVIDIA. AMD has not done well in the server space these last five years, and the PC space has started to shrink, in part because tablets and smartphones have become more popular and mostly use ARM based CPUs, rather than the more capable and power-hungry x86 coded chips made by AMD and Intel.

In 2012, in an effort led by the remarkable vice president of global business units Lisa Su, AMD started to re-target its intellectual property development towards growth sectors. The acquisition of SeaMicro acted as an entry to the dense server space, where AMD's graphics expertise could eventually help with highly-parallel computations, and Opteron technology is a better fit than Intel's server chip designs. In addition, AMD has announced it will use ARM technology when appropriate in this field. Although the complete new system will not be available for some time, Rory reported that Q4 SeaMicro revenue grew.

A second major line of attack is embedded SoC chips. This is a bit of a vague term; as used by AMD, it seems to amount to the non-PC sector. SoC, System on Chip, typically means that the chip is not a stand-alone CPU. In reality, even what we now call CPUs are not stand-alone CPUs: AMD has been a leader in moving critical components that "glue" the CPU to the rest of the system, like memory controllers, onto a single chip. Embedded SoC in this case means customized for a particular application. Rory indicated AMD would be looking only at relatively high-volume applications as margins have been too low in some low-volume systems. Examples of possible embedded AMD chip use would be for advertising displays, casino machines, industrial and medical use.

AMD does not currently break out embedded revenue, but the goal is to raise it to 20% of revenue by the end of the year. No word on whether that is 20% extra revenue or 20% replacement of eroding PC revenue, and Rory made it clear no details would be announced until the OEMs are ready to announce them.

The PC business, of course, is still critical, as is the entry into tablet computing. Rory made a point that AMD engineers are executing well, making their timeline, and in one crucial area are about 6 months ahead of Intel. Along those lines, AMD has demonstrated working Temash and Kabini silicon. These APUs will be quad core SoCs for the tablet and mobile markets. They also already introduced the new Richland A series APU, upgrading a sweet spot in their line.

This morning as I write AMD has popped from its pre-conference and results close of $2.45 up 9% to $2.67. Obviously no one knows if AMD will be able to execute its plan or if, once products are available, they will sell well enough to bring AMD back to profitability. It has the look and feel of a good plan and a big turnaround to me, but I have been wrong about AMD in the past, and the sands of silicon are shifting rapidly and unpredictably. Before getting bullish on AMD, I'd like to see the 2013 products, the revenue, and the profits.

Disclaimer: I have long been long AMD and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also:

www.amd.com

My main AMD analyst conferences page.

My AMD Q4 2012 analyst conference notes

TTM Technologies (TTMI) Updates Q4 Guidance

2013-01-18T15:07:00.001-08:00

TTM Technologies (TTMI), the largest American manufacturer of printed circuit boards (PCBs), saw a sharp drop in its stock price to $7.37 on Tuesday, January 15 after a story of a downgrade from an analyst at Stifel Nicolaus was circulated.

The company responded by updating its fourth quarter 2012 guidance on Thursday, coinciding with a presentation to investors that had already been scheduled. These results were equal to or better than the guidance TTMI gave when reporting Q3 (See TTMI Q3 2012) . The stock had recovered to $7.98 by market close today.

Q4 revenues are expected to be between $360 and $380 million, with GAAP earnings of $0.07 to $0.14 and non-GAAP earnings of $0.14 to $0.21.

In addition CEO Kenton Alder told investors that the high rate of capital expenditures of 2011 and 2012, which was required to meet high demand for the most advanced technology PCBs, would trend downward in 2013, from about $120 million to closer to $100 million. That will free up cash flow for other uses.

In Q3 2012 TTM's largest customers had been : Apple, Cisco, Ericsson, Huawei, and IBM, which together accounted for 31% of total sales. The largest customer, Apple, accounted for 14% of sales.

There has been much talk of a slowdown in demand for Apple products, which may have caused some analysts to assume TTMI would have a poor quarter, or poor growth in 2013. Mr. Alder pointed out that Apple is a relatively new customer for TTMI, and as such the PCBs made for Apple are for the iPad, not the iPhone. He said there had been no decrease of orders so far for iPad PCBs. He explained that as the newest PCB supplier to Apple, with the newest technology available, TTMI is gaining share from other suppliers of PCBs for Apple.

He also said TTMI makes the PCB for the Amazon Kindle Fire. Because it is a global company with a broad array of customers, TTMI is not particularly vulnerable to reduced demand from any particular client.

He also said that networking sector orders picked up in the quarter, but he was not yet ready to say this was a trend.

According to NASDAQ, of institutional (sell-side) analysts covering TTMI, 2 rate it as a Strong Buy, 1 as a Buy, and 4 as a hold.

Disclaimer: I own TTMI and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also:

TTM Technologies investor relations

My main TTMI analyst conferences page.

Go to TTMI Q4 call notes to bookmark for February 5, 2013 analyst call

SGI Q2 Deals Slip from Fiscal Cliff

2013-01-15T19:05:00.000-08:00

SGI (Silicon Graphics International) today announced preliminary December 2012 (fiscal Q2 2013) results that exceeded earnings guidance while falling short of revenue guidance.

Based in Fremont, California, SGI manufactures supercomputers that are used in science research, Internet-based businesses, security, and other computation-intensive businesses. Revenues for the quarter were near $171 million, well below guidance of $180 to $195 million. CEO Jorge Titinger attributed the shortfall to three large deals with government agencies that normally would have closed in the quarter. In total the deals represented $15 million in revenue, and two of the three have closed since the quarter ended. The delays were due to agency concerns about their budgets due to the fiscal cliff standoff.

Despite the revenue shortfall, profits came in above prior guidance. This was due to better management, including closer attention to profit margins on individual supercomputer sales. On a GAAP basis net income is expected to be between break even and $1 million, or zero to $0.03 per share. On a non-GAAP basis net income is between $3 million and $4 million, for $0.07 to $0.10 earnings per share (EPS).

SGI ended the quarter with $128 million in cash, up $17 million in the quarter. Titinger and the new management team have started requiring deposits and milestone payments on the more expensive supercomputer systems, resulting in better cash flow.

It a presentation to investors, Titinger emphasized SGI's expertise in Big Data and Scale-Up Computing, as well as innovative storage solutions for massive amounts of data that need to be available for analysis. He talked about how SGI computers can do complex security checks for credit cards in real time (as they happen), something that used to take days to do.

As a sweetener SGI will used $15 million of its cash to buy back shares.

SGI stock ended the day at $10.87, up $0.34 for the day or 3.2%. That gave SGI a market capitalization of $360 million.

Disclaimer: I own SGI stock and will not trade the stock for 3 days after the publication of this report.

Dendreon's Provenge Revenue Trends

2013-01-08T18:00:00.001-08:00

After finally getting FDA approval for prostate cancer therapy Provenge in May 2010, Dendreon's management thought their main problem would be setting up enough manufacturing capability to meet patient demand. Instead, and largely due to the FDA's unconscionable approval delay, by the time Provenge was available prostate cancer competing therapies were coming to market, from companies with larger and more experienced sales forces.

So revenue did not ramp as fast as Dendreon expected. Worse, they leveled off this year. Here are the numbers:

Provenge revenues, millions	2011	2012
Q1	$28.1	$82.0
Q2	$49.6	$80.0
Q3	$65.8	$78.0
Q4	$77.0	$81.6

The Q4 2012 Provenge revenue is preliminary, and excludes a $3.8 million favorable adjustment to chargeback reserves which had built up in prior quarters.

Provenge seems to be in a run rate of $320 million per year, which would be a pretty successful drug if its cost of production were more normal and if it was one of many therapies of a corporation. But at $320 million per year it makes Dendreon a money loser.

The Q4 $81.6 million is suggestive of a trend. Provenge therapy is a bit complicated, so a quarter with major holidays like Q4 might be expected to show some seasonal decline. Q4 2012 is improved $4.6 million or 6% over Q4 2011. It is also up sequentially $3.6 million, or 5%.

On the other hand, the peak so far is back in Q1 of 2012. Also, a number of factors might make revenue slop in or out of a particular quarter.

Even as we await the analyst conference and official numbers for Q4, our minds move to Q1 2013. I would put the goal post at $85.0 million for calling a trend. That would give us 4% annual growth and a record quarter. Even 2 up-trending quarters is not enough to go out on a limb on, but it might start to restore confidence in the financial future of Dendreon.

Disclaimer: I am long DNDN and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also: www. dendreon.com

My main Dendreon notes page.

Onyx Pharmaceuticals (ONXX) Profit Ramp Ahead

2013-01-07T11:29:00.001-08:00

Many, but not all, analysts had a dim view of Onyx Pharmaceuticals (ONXX) at the beginning of 2012. Onyx had only one approved therapy, Nexavar for liver and kidney cancer. Between sharing Nexavar revenues with marketing partner Bayer and heavy R&D spending on new drugs and indications, Onyx ended in the red in most quarters.

What a difference a year makes. Onyx now had 4 approved indications and data that should earn approval for 2 more. A deeper pipeline exists as well. Its newly approved drug Kyprolis for MM (multiple myeloma) had revenues of $62 million, most of which would have been in the fourth quarter. This does not necessarily mean that Onyx will show a profit for Q4, but it does look like 2013 will be remarkably good, with 2014 even better.

The third approved therapy, and fourth approved indication, is Stivarga (formerly Regorafenib), which was also developed in conjunction with Bayer. Bayer will do the selling and Onyx will receive a 20% royalty, which will be cash that goes straight to the bottom line. Stivarga was approved in September 2012 for colorectal cancer patients who have been previously treated with currently available therapies. Royalties should ramp in 2013.

The fifth indication is Nexavar for iodine-refractory differentiated thyroid cancer. Again, Bayer will do the sales and share revenue with Onyx. The Phase III trial results are still to be submitted to the FDA, but approval is likely and revenue could commence in late 2013 or early 2014.

Sixth we have Stivarga for GIST, gastrointestinal stromal tumors.

So in 2013 we have a mid-sized biotechnology company with high expectations of multiple revenue ramps which should continue into 2014 and beyond.

Early in 2012 you could have bought ONXX at its 52-week low of $35.73. As I write the price is $81.41, or 128% above that. It already hit a 52 week high of $93.18.

I see Onyx as a company that will demonstrate its ability to generate revenue and profits during 2013 and 2014, but it is important to keep in mind how lengthy global cancer ramps can be. There is the whole rest of the world and even today Nexavar is still expanding into new nations for liver and kidney cancer, several years after introduction. Cancer approvals often start in second-line or later settings. Revenues can ramp significantly if the drugs can will approvals for administering to new, first-line patients.

Also, there has to be a lot of unrealized value in the management team. There are a lot of therapies out there to buy the rights to develop. Most drugs fails somewhere between Phase I trials and FDA approval. Onyx management, led by Anthony Coles, M.D., has done a remarkable job picking therapies and targets for development. It might be just luck, but it likely means they will do well with their earlier-stage pipeline and any future rights they acquire.

Onyx still has a very high P/E ratio, but that should drift down as profits ramp in 2013.

It looks to me like Onyx Pharmaceuticals is a stock to buy and hold for at least the remainder of this decade. If you can think that long-term.

Disclaimer: I am long ONXX and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also:
www. onyx.com
My main Onyx Pharmaceuticals analyst conferences page.
My October 30, 2012 Onyx Q3 conference notes

Inovio Positive Vaccine Data Releases

2012-12-17T19:04:00.000-08:00

Inovio (INO) is a micro-cap biotechnology company that is developing innovative vaccines and delivery systems. It has a market capitalization, today, of $71 million and the stock price closed at $0.51. (versus 52wk High/Low $0.90/$0.37; volatility is high)

Inovio's vaccines are aimed at difficult to treat viruses that typically exist in multiple strains. This means a specific traditional vaccine has to be developed to protect people from each strain. That takes times, and a new strain can emerge and infect a global population faster than a traditional vaccine can be developed. Inovio's SynCon vaccines are believed to provide cross-protection against multiple strains.

Results have been coming in on a regular basis from trials. In September Inovio announced an open-label Phase I study of its universal H1N1 influenza vaccine provoked immune responses "against some of the most prevalent strains of H1N! influenza from the past 100 years."

One veterinary subsidiary of Inovio reported its improved LifeTide DNA plasmid therapy for pigs to produces more piglets per litter, with higher birth weights, and at a lower dosage than the original version. A separate subsidiary in New Zealand received regulatory permission to market the therapy in October.

Also in October results from a VGX-3100 vaccine trial for HPV (human papillomavirus) showed 100% of 18 patients in the trial showed antigen-specific antibody response, while 78% showed T-cell responses. A phase II trial now underway will determine if the immune responses are able to reverse disease progression to cervical cancer.

In pre-clinical trials Inovio demonstrated that its electroporation technique for introducing its vaccines to skin using minimal invasion "induces robust cellular and humoral immune responses."

November was a busy month. First Inovio Hepatitis B (HPV) vaccine demonstrated the potential to clear HBV from the liver in mice in a pre-clinical trial. Another preclinical study showed T-cell immune response in Cytomegalovirus (CMV).

On December 6th positive Phase II interim results were reported in the leukemia trial. This could lead to treating CML (chronic myelogenous leukemia) with a vaccine. The results are from just 8 patients, with 14 patients currently enrolled and a total of 31 to be studied in the full trial. In addition to showing the vaccine to be safe. Patients received six does of two DNA vaccines at four week intervals. Tests showed T cells and leukemia antibodies were generated. Note, however, no data was released as to whether the patients responded to the therapy by delays in progression or the other usual indicators. In addition to CML, some of the patients to be enrolled will be suffering from AML (acute myeloid leukemia, a more common variety than CML).

Most recently, on December 10th interim Phase I results for H1N1 flu vaccine given to elderly patients were announced. 50 patients were in the trial, with two sets of 20 receiving the vaccine on differing schedules and 10 control subjects who received the traditional seasonal flu vaccine. Immune responses registered at 40% for the Inovio vaccine, double the rate of 20% responding to the traditional vaccine. It was previously known that elderly patients tend to not gain immunity from standard flu vaccines.

What is innovative about Inovio vaccines? They are DNA vaccines. Traditional vaccines consist of weakened or dead viruses or their protein coatings. DNA vaccines need to be inserted into cells (instead of into the bloodstream), but once there can trigger both antibody and T-cell immune responses. To insert the vaccines into cells Inovio uses an electroporation device it developed and has successfully tested. Inovio, in fact, resulted from the merger of a vaccine company and an electroporation developer.

It is important to note that all of the new data is from early-stage trials. To receive FDA approval for commercial sales of a therapy typically two successful Phase III trials are required. Inovio Pharmaceuticals is a developmental stage company with all the risks and uncertainties inherent in that status.

In addition to the recent news, Inovio has a Hepatitis C vaccine in a Phase II trial, and an HIV vaccine in Phase I. It has more cancer vaccine candidates: prostate in preclinical, and a breast/lung/prostate cancer trial in Phase I.

Despite the risk of failure common to all new biotechnology, I believe Inovio is more likely than not to be worth far more in a few years than it is now. Inovio has many shots on goal. Only one vaccine would need to be approved by the FDA to make Inovio a highly-valuable company.

Another risk for investors is that Inovio is likely to need to raise cash to complete its program of demonstrating the effectiveness of its vaccines, and to commercialize them. However, as of the end of Q3, Inovio had $15 million in cash, and some of the trials are being conducted, or paid for, by partners.

Disclaimer: I am long INO. I will not trade INO for 7 days following the publication of this article.

Keep diversified! You should also take a good close look at inovio.com and SEC documents before risking your capital.

Dot Hill Hopes for 2013

2012-12-05T14:46:00.001-08:00

Dot Hill (HILL) stock has been one of the worst performers in my portfolio lately. It is trading today at $0.88 per share, versus a 52 week high of $1.65 and 52 week low of $0.72. I have been invested in HILL for years, but more so than for most of my portfolio it has been a stock I have traded in, rather than just holding.

Dot Hill is a specialty data storage (SAN) solution equipment manufacturer, with many companies rebranding and selling its products, and HP as its by-far single largest customer. Looking at the past few years, management has continually indicated that prosperity (solid profits) is just around the corner, 2 or 3 quarters out, but the profits never have materialized. Hence credibility is low, and so is the stock price.

But maybe this time for sure. HILL is rolling out new products and has a number of new customers, some announced and some yet to be announced. The recent numbers look bad, however, because each customer requires some customization of the stock product. This increases R&D expense, which can only be recaptured in later years if product sales ramp and if gross and operating margins allow for it.

How could 2013 be different than 2012? Let's use Q3 2012 as a baseline. Revenues were $48.2 million, up 1% sequentially from $47.8 million, and up slightly from $48.1 million in the year-earlier quarter. GAAP net income was negative $3.0 million, improved sequentially from negative $5.0 million, and much improved from negative $12.2 million year-earlier. GAAP EPS (earnings per share) was negative $0.05, up sequentially from negative $0.09, and also up from negative $0.22 year-earlier.

Market capitalization is about $49 million, despite cash holding of $40 million, with just $2 million in debt, at the end of Q3.

Two new storage systems are sampling in Q4, the 4000 series and 5000 series. These newer systems will allow Dot Hill to serve a broader section of the market. Currently Hill's systems are used mainly for small businesses and the value end of the enterprise market.

The AssuredSAN 4000 series works with 8Gb Fibre Channel and 6Gb SAS (serial attached storage), the same as the 3000 series, but has optimized features adding extra speed for video streaming and broadcast, HPC (high performance computing), and post-production work.

The AssuredSAN Pro 5000 series works with 8 Gb Fibre Channel or 10 GbiSCSI and adds automated tiered storage software, thin provisioning, SSD acceleraton and other high-end features.

An important aspect of both new products should be improved margins, coinciding with the mid-market end use. Both build on top of the successful AssuredSAN 3000 series, which is a leader in the low-end market. The new 4000 and 5000 series are meant to be both feature and price competitive, so there is reason to hope for strong sales as 2013 progresses.

While there is a fear of investing in the hard disk drive (HDD) market right now, it is important to note that Dot Hill products are used in corporate datacenters and for cloud computing and big data. The use of smartphones and tablets is causing the need for rapid storage build out for the Internet, and the move to video is creating huge data storage demand.

Can Hill and its partners compete successfully in this market? Based on the past five years of experience, the answer would be just barely. But Hill was a train wreck when it got dumped by its biggest (then) client, Sun Microsystems. It has remained standing while a number of competitors were absorbed into larger companies. While it competes with EMC, it has an alliance with HP and a large number of smaller OEMs and value-added retailers. Dependence on HP has decreased. Autodesk is among the list of important new customers. Feedback on the new products has been very positive.

Right now HILL is more of a bottom-fishing play than anything else. To see the stock back at the $4 to $5 range management will have to deliver both improved revenues and improved margins. The possibility of achieving that makes it is a stock that is worth watching in 2013.

Disclaimer: I am long Dot Hill. I won't make HILL trades for 1 week after publishing this article. I do not have positions in any of the other companies mentioned.

See also: www.dothill.com

Gilead Sciences Pipeline Value

2012-12-03T17:15:00.000-08:00

Gilead Sciences (GILD), has had a good year so far. On January 3, 2012 it opened at $41.46. Today it closed at 74.61, fairly near its 52-week high of $76.28. So up 84% this year. I used to write about Gilead more often during the years 2007 to 2011, arguing that it was undervalued. After finally getting a solid run up, is it time to bail out, hold, or buy more?

The forward-looking story is now largely about curing Hepatitis C, but first the latest backward-looking numbers.

In Q3 revenue was $2.43 billion, up 1% sequentially from $2.41 billion and up 14% from $2.12 billion in the year-earlier quarter. GAAP net income was $675.5 million, down 5% sequentially from $711.6 million, and down 9% from $741.1 million year-earlier. GAAP earnings per share (EPS) were $0.85, down 7% sequentially from $0.91 and down 10% from $0.95 year-earlier. Non-GAAP net income was $788.9 million, up 3% sequentially $767.3 million, and down 1% from $795.2 million year-earlier.

Profits did not keep pace with revenue growth because of costs from the Pharmasset acquisition from earlier in the year and a significant increase in R&D expense. Gilead is currently rolling out its newest HIV drugs like Stribild, which is helping revenue, but the R&D is not so much for HIV. The new R&D research is focused on hepatitis and oncology.

Why the emphasis on hep c? While Gilead Sciences has branched out into treatments for cardiovascular diseases, its primary expertise in in anti-viral drugs, particularly for HIV infections. Because of the effectiveness of its single-tablet, multi-drug combinations, Gilead dominates that market. Gilead also markets Viread for Hepatitis B. The past generation of Hepatitis C therapies have limited effectiveness, have a number of side effects, and cannot be administered orally.

Before the Pharmasset acquisition Gilead had four hepatitis drugs in phase II trials, and three in phase I, and said they would likely be made into a successful combination therapy. Pharmasset added Phase III candidate PSI-7977 (now Sofosbuvir), Phase II candidate Mericitabine, and Phase II candidate PSI-938, all for hep C. Pharmasset also brought candidates for HIV and hepatitis B treatment.

The latest set of results is for Sofosbuvir. The Phase 3 POSITRON study showed a response rate of 78% for hepatitis C (HCV) genotypes 2 and 3 when Sofosbuvir was combined with Ribavirin. It is notable that this is an all-oral regimen which does not include the using old standard, interferon. In tracking HCV note that a drug combination that works well with a particular genotype may not work with others. After 12 weeks of therapy and then an addition twelve weeks to see if the virus returned, HCV was not detected in 78% of patients. For those who are keeping track, Sofosbuvir used to be GS-7977.

Better still were the results from Sofosbuvir combined with GS-5885 and Ribavirin for genotype 1 HCV patients. Following 12 weeks of therapy and then 4 weeks without therapy, the response rate was 100%. Used with just ribavirin, Sofosbuvir had mixed results ranging from 84% for genotype 1 patients with no prior treatment down to only 10% response for genotype 1 patients who had not responded to prior treatments. For genotype 2 and 3 mixes, the range of responses was 60% to 68%.

Note that 100% cure rate is not necessary for FDA approval. As long as a combination can be found that does well with previously-untreated patients or that helps patients who were not helped by current therapies that include interferon, with about a 40% cure rate, the drugs could fulfill an unmet medical need.

At the same time it is a race, since other companies are also trying to break into the all-oral hepatitis market. It is a huge market. An estimated 150 million people world-wide have chronic hepatitis C, with the U.S. figure likely somewhere between 3 and 6 million (many people have undiagnosed HCV). For a less positive spin on the overall competition in hepatitis, I try Lessons from the Liver Meeting at Seeking Alpha.

Using the standard trailing 12-month ratio, Gilead's current P/E is 23.3. That is up quite a bit from earlier in the year. Conservative investors may want to wait until Gilead has actual FDA approval for a hepatitis C before extrapolating their chickens. As usual, the problem is by that time the stock may be priced even higher.

I don't think the current market has even priced in the true future value of Gilead's current drugs, much less the potential of a Sofosbuvir cocktail. In my particular case I feel comfortable with looking to the continued appreciation of my current holdings. I might still buy if the hep C data keeps getting better without a corresponding rise in the stock price. I have portfolio rules that restrict any stock to a maximum percentage of the entire portfolio, and could be forced to sell some if the stock rises too rapidly in price, though that seems unlikely at present.

Even with a great growth potential Gilead has, there are the usual risks from competition, macroeconomics, failure to receive FDA approval, etc.

Keep Diversified!

Disclaimer: I am a long-term investor in Gilead Sciences. I will not trade in the stock for a week from today.

See also:

my Gilead Sciences Q3 2012 analyst call summary

www.gilead.com

Dendreon on the Ropes

2012-11-23T18:08:00.000-08:00

Back on April 29, 2010, Dendreon announced that Provenge had been approved by the FDA. That day DNDN opened at $40.09 and closed at $54.58. On March 6, 2009, it had opened at $2.77 per share. Today DNDN closed at $4.45. Was FDA approval really that meaningless?

Recent Q3 sales results for Provenge were down sequentially from Q2, which is not reassuring, although not as bad as some of the anti-Dendreon crowd had predicted.

Dendreon still has a couple of shots at getting off the ropes and becoming a valuable company, but a further drop in Provenge sales, or even stasis, could lead to bankruptcy. Investors have mostly erred on the side of safety, and abandoned hope. This means there is more upside than downside at today's price, but the downside risk is still considerable.

Provenge is an immunotherapy that is approved by the FDA for asymptomatic or minimally symptomatic metastatic castrate resistant (hormone refractory) prostate cancer. Like most cancer therapies it is not a cure, but has demonstrated statistically significant benefits in survival times for patients. Unlike many cancer therapies, it has relatively minimal side effects.

Dendreon's past management made a number of strategic mistakes, but that is only knowable in retrospect. When Provenge should have first been approved by the FDA (in my opinion), competing new drugs were a couple of years from potential approval. By the time Provenge was finally approved, competitors were on the verge of approval. Management's primary concern was building out the facilities needed to produce Provenge (treating patients white blood cells to recognize cancer antigens) as rapidly as possible, which was a capital intensive prospect.

It isn't that management thought Provenge would sell itself; they also had a sales force prepared to sell Provenge. However (and Provenge is by no means the only therapy this has happened to in the last few years) there were doubts raised in the medical community about the value of Provenge. More importantly, doctors are used to handing out pills or hooking up patients to IV's, and Provenge instead required taking white blood cells out of patients, shipping them to processing facilities, and then shipping them back to the doctors for re-infusion into patients. Provenge built three facilities in different areas of America so that the logistics would work out.

Provenge revenue was first reported for Q2 2010, $2.8 million for a partial quarter. Revenue then jumped in Q3 2010 to $20.1 million. After that there was a ramp that was slower than original guidance by Dendreon management, which finally peaked at $82.0 million in Q1 of 2012.

Q2 2012 revenue declined to $80.0 million, and Q3 revenue was $78.0 million. Management claims there is still considerable unmet demand for Provenge and revenue can be ramped to at least $100 million per quarter. To reduce costs employees have been laid off and one of the three manufacturing facilities has been closed. Management believe $100 million per quarter is cash flow break even.

Since debt ($554 million) exceed cash ($445 million), a few more quarters of revenue under $100 million could cause Dendreon to seek bankruptcy protection, wiping out shareholder value. The debt is in the form of convertible notes due in 2014 and 2016.

However, there are several positives going for Dendreon, which could increase revenue in both the short and the long run. Because it is an immunotherapy, there is an argument that Dendreon should be the first therapy tried once a patient arrives within its FDA label. Right now that does not yet appear to be the consensus within the set of physicians who are potential prescribers. Thus the future value of Dendreon stock currently highly dependent on the educational capabilities of the Provenge sales force and leading physicians who are advocates for the therapy.

There is potential expansion of the label, with clinical studies underway that could provide the factual basis for this. Even that is another double-edged sword. If studies fail to find statistically significant benefits for patients outside the current label, that might weaken physician interest for patients inside the label. If the studies are positive the expansion of the addressable patient base should easily take Dendreon past the $100 million per quarter line.

Finally, there is Europe. If you already own Dendreon stock, this is certainly worth waiting for. There should be an EMA decision around mid-2013. But it is not a sure bet. The EMA is not obliged to follow the FDA, although it typically does. The European health care system has shown more price-sensitivity than America, which could stall adoption or reduce margins. Finally, another capital-intense facility would need to be built. Maybe they can move the machines from the closed U.S. facility to Europe if approval is granted.

Dendreon is one of the most interesting stock stories in the past five years. It peaked at $55.43 on May 3, 2010, as brokers who worked with analysts had dismissed it a year earlier hyped it as the hot new stock. On March 6, 2009, it had opened at $2.77 per share. That was some ride. It was a great illustration of how auction pricing systems can get wildly out of touch with reality.

The way I look at it, there are three ways for Dendreon investors to win: if sales start ramping again in the U.S. within the current label; if the label is expanded in the U.S.; and if Provenge is approved in Europe. That is not bad odds, but the downside is potentially losing the entire investment. Market cap ended today at $687 million, which normally would assume profits can run something like $15 million per quarter in the foreseeable future. Since the future is not foreseeable, buying or selling DNDN at today's price comes down to how much risk investors are willing to take on.

Disclaimer: I am long Dendreon. I won't trade DNDN for 1 week following the publication of this article. I buy and sell Dendreon depending on my assessment of its statistically likely true value in comparison to its price.

Cantel Medical Acquisitions Fuel Earnings Growth

2012-11-05T15:30:00.000-08:00

Cantel Medical (CMN) specializes in disinfection equipment for dental offices and medical centers. Its products range from face masks to complex endoscope sterilization machines. Today it closed at $26.31, up $0.40. Cantel's 52 week high was $28.97 on September 25th. Is Cantel's run up over? Should it be bought or held for its long-run potential?

Cantel has grown both organically and through acquisitions. Acquisitions are often not a plus for investors. In Cantel's case, however, the acquisitions have gone very well. The acquired companies were bought as reasonable prices. Cantel has been able to increase margins at the acquired companies, partly by using its existing sales forces to ramp sales. The process has left Cantel with some debt, but it is at low interest rates and there is a clear path to paying it off.

In fiscal Q4 ending July 31st Cantel Medical revenue was $98.7 million, up 2% sequentially from $97.2 million and up 15% from $86.0 million year-earlier. Net income was $9.6 million, up 17% sequentially from $8.2 million and up 104% from $4.7 million year-earlier. EPS (earnings per share) were $0.35, up 17% sequentially from $0.30 and up 94% from $0.18 year-earlier.

Last Friday a new acquisition was announced. It resembles earlier acquisitions: small enough to digest easily, complementing an existing business, and with a very fair price to earnings ratio. SPSmedical Supply Corporation does sterility assurance and monitoring, so it fits well with Cantel's Crosstex division. Cantel paid $32 million. EBITDA for the last year was $4.3 million, so it cost less than 8 time EBITDA. There will be some acquisition costs in the December quarter, including $3.5 million capital expense to buy the facility SPSmedical works out of. But in the March 2013 quarter it should add roughly $1 million to profits.

Cantel ended fiscal Q4 with $30 million in cash and $60 million in debt. After this transaction net debt should be around $65.5 million. Since cash flow from operations was $17.7 million in the quarter and should continue to rise in 2013, net debt should be approaching zero in 2014 unless more acquisitions are made or there is significant capital expense during 2013.

I have been watching Cantel Medical since early 2010. I was originally attracted to the infection control story, which I knew had become a serious problem in hospitals. Infection control spending has ramped considerably these last few years, but much remains to be done. Cantel has competitors in each of its areas of expertise, but it also tends to be a leader. It is a remarkably well run business with a frugal management that seems to be committed to working to build long-term value for shareholders.

Cantel is not exactly a cheap stock, with a P/E of 23.1 at today's price. The P/E has been justified by the quality of management and earnings, but there is no guarantee it will remain at the current level. Cantel pays a small dividend, with a yield well under 1%, which is fine for me as I am looking for long-term returns and feel cash should be used to pay off debt and to expand further.

Note that Cantel was affected by the recession, and its revenues are not immune to macroeconomic factors. It also has had some spikes in revenue during infectious disease scares, so it can be a bit lumpy from quarter to quarter and, to a lesser extent, year to year.

Cantel is suitable to conservative long-term investors at today's price.

Disclaimer: I own Cantel Medical. I will not make trades in CMN for one week following publication of this article.

Keep diversified!

I Buy Adept Technology (ADEP)

2012-11-05T09:18:00.001-08:00

Just a brief note that I bought a small initial position in Adept Technologies, symbol ADEP. You can read my prior assessment at Adept Technology First Look.

This is a very long term investment for me. I have no reason to think Adept is going to go up in price in the near future. There will be an Adept Technology conference call on November 8, this Thursday. I will take notes on it and post them. See my Adept Technology Analyst Conferences page for a link.

I decided to go ahead with the ADEP purchase because I believe there is a future in robotics and that Adept is addressing a significant unmet need. Adept has grown both by acquisitions and by organic growth and appears to be well-managed. Needless to say, that does not guarantee success.

So keep diversified!

Marvell (MRVL) Wins Microsoft Surface RT Wi-Fi slot

2012-10-29T17:15:00.000-07:00

Marvell Technology Group (MRVL) won a slot in the Microsoft Surface tablet computer. According to Anandtech (Inside Microsoft's Surface RT Tablet, October 16, 2012), the WiFi chip on the tablet is Marvell's. NVIDIA won the main prize with its Tegra 3 ARM-based processing chip. Atmel also had chips in the design.

We don't know how many of the WiFi chips Marvell shipped to Microsoft in the summer quarter (Marvell's fiscal Q3 2013 ending October 27, 2012), but it was not enough to balance the damage in the hard disk drive (HDD) controller chip business. Marvell dominates HDD controller chips, but the problem is that the largest single use of HDDs in in PCs. It was a terrible quarter for PC sales, and little HDD makers Seagate and Western Digital could do about it.

Marvell had guided revenues to $800 to $850 million. The update issued on October 18 put revenues at $765 to $785 million. At the midpoint there is a $25 million miss on the low end of prior guidance. Just about all of that came from the HDD segment. Marvell also makes chips for smartphones, for networking (ranging from WiFi to high-end datacenter Ethernet), for Google TV and similar appliances, and for video processing in HD TVs. It is moving into new areas like LED controllers.

The fourth quarter is a big question mark. A lot depends on the global outlooks of OEMs. If they are pessimistic they may further shrink inventories. If holiday sales go well, they may have to expand inventories, giving chip manufacturers like Marvell a boost.

While there is a lot of uncertainty about Q4 and about 2013, Marvell is well set to manage their way through it and eventually expand into new businesses, as they have in the past. Even at the current level of revenue Marvell is a cash cow. At the current stock price, $7.755 at the close Friday, you are buying $0.75 in trailing 12-month earnings and dividends of $3.1% per year, plus a cash balance of $2.13 billion, or $3.82 per share. In the latest quarter cash flow from operations was $0.34 per share. It looks to me like the market over-reacted to the revenue miss. At this price Marvell stock is well worth the risk, in my opinion. But then I started accumulating Marvell stock years ago.

Marvell is large enough and diverse enough that if only moderate numbers of Microsoft Surface tablets get sold, that probably won't have a significant impact on Marvell revenue or profit. Then again, the Windows Surface is a really hot device, and may sell in more than moderate numbers. It is on my wish list.

Disclaimer: I am long Marvell and Seagate. I will make no position changes in them for a week after this article is published. I do not have a position in Microsoft, Western Digital or NVIDIA and also will not initiate one for a week. Also, I occasionally do freelance work for Microsoft.

Can Design Wins Save AMD?

2012-10-24T10:35:00.002-07:00

AMD got crushed in Q3, following a disappointing Q2. Yet at the Q1 analyst conference AMD execs were optimistic (See AMD Guides to Strong 2012, April 19, 2012).

Right now AMD stock is trading not just near 52-week lows, but near lifetime lows. At $2.07 per share AMD has a market capitalization of $1.5 billion. Is AMD now a matter for bankruptcy courts, where stockholders will get wiped out and even bondholders get pennies on the dollar? Or is there still hope for investors?

I could pick only one cause for optimism at the recent Analyst Call. It is not the restructuring plan, which will cut costs but will also probably cut R&D and sales muscle. It is alleged design wins.

Note that as bad as the quarter was (revenue of $1.27 billion, down 10% sequentially from $1.41 billion and down 25% from $1.69 billion in the year-earlier quarter), AMD is still a large company, with annual revenues of perhaps $5 billion. Its market cap, again, is $1.5 billion. If it could make those revenues profitable its market cap should trend back up towards $5 billion.

So design wins could matter, if they either increase revenues at good margins, or replace poor-margin revenue with good margins. Margins have always been a problem for AMD because rival Intel has always been able to set good margins and leave the dregs for AMD, even when AMD has brought out products that, in certain niches, were superior.

For months rumors have circulated that AMD had won spots in some of the major forthcoming game consoles: Sony, Microsoft Xbox, and Nintendo. Rumors vary: in the most optimistic, AMD wins all three.

All CEO Rory Read would say was that AMD already has confidential high-volume design wins in place. He would not even specify if these were game console wins as opposed to tablets or just Windows 8 notebook computers.

Certainly AMD's combined CPU and GPU chips, or APUs, fit well with any graphics-intensive, low cost system design. The current generation of game consoles is ancient and are expected to be refreshed in 2013.

But as experienced tech investors know, while design wins are a necessity, they are no guarantee of commercial success. Not all products sell. Gaming consoles have to compete against everything from smartphone games to Google TV to HTPCs. We also don't know how well Windows 8 tablets that don't use ARM-based processors will sell. We don't know if Windows 8 will help or hamper computer sales (I like Windows 8 a lot, but then I can be pretty geeky. Disclaimer: I just finished a freelance subscontracting job for Microsoft).

So the good news is that you can buy AMD stock for a song right now, and it will probably survive the year 2013, and might even thrive if the console and tablet manufacturers are not able to bargain margins down too much.

I am keeping AMD to a very small percentage of my portfolio, but opportunistically accumulating more stock. The safe thing to do is to keep away from AMD unless you already own it.

I will also repeat what everyone knows: AMD's IP is worth more than its market capitalization. Korean or Chinese companies would probably be willing to pay at least $3 billion for the graphics division alone, but AMD management thinks it can do better on its own.

Disclaimer: I am long AMD. I won't make any changes for at least a week after this article is published. I do not own Microsoft, Sony, ARM, Intel or Ninendo stock.

See also my AMD Q3 2012 analyst call summary;

www.amd.com

Another Bad Day for AMD

2012-10-12T07:10:00.000-07:00

AMD is plunging to new multi-year lows today. Egg on my face, I added to my position recently, so I just managed to add to my losses.

With all the bad news in the PC industry I did not expect AMD to make its previous guidance, which was for an essentially sequentially flat Q3, when Q3 is typically the strongest quarter of the season.

Preliminary Q3 results were released today, with revenue down 10% sequentially and a $100 million inventory write off. Ouch. Considerably worse than I anticipated.

Can AMD survive? It is a fair question. I still like AMDs graphics and graphics-integrated APUs (advanced processing units). I still think that desktop PCs with big screens can do a lot of things that mobile devices can't do. I am looking to buy a larger screen and an APU-based computer myself, and I think having massive parallel processing on the CPU (graphics really is parallel processing) is going to open some new doors. I am waiting for Windows 8 to be released so I don't have to install Windows 7 and then upgrade (I'll also be installing Linux since I increasingly use opensource software that runs better on it).

Intel is well set up financially to survive a slump in PC demand, but then they own their own fabs. AMD is fabless, so they just tell their foundries they want to produce less chips. Obviously in Q3 they both produced too many chips and also could not sell some of their older chips, implying they produced too many chips as far back as Q4 2011.

Might as well hold onto my AMD stock and see what happens, at this price. I often take riskier stock positions than I would advise for conservative investors. I've done really well with ONXX and FNHC lately, so the AMD decline won't hurt me that much.

Disclaimer: I am long AMD.

Buying AMD Today

2012-09-25T11:32:00.000-07:00

This is just a note to my readers that I added to my AMD position on August 31 and again earlier today. AMD is at or near multi-year lows.

I believe the situation is not as dire as the shorts think. Even mediocre Q3 results, which are scheduled to be reported on October 18, could force the shorts out and the stock price up. AMD is executing well, with new GPUs about to be announced and with desktop Trinity APUs due for release on October 2.

The pros and cons of AMD have been raked over by myself [See my AMD analysis page] and many others. A good summary of the buy arguments for AMD is CFO Resignation Irrelevant, Buy AMD by Ashraf Eassa, with lots of comments reminding us of the cons of buying AMD even at this super-low price.

Disclaimer: I own AMD stock. I don't trade in volumes large enough to affect the stock price, so I am not putting any time restrictions on my trading activities due to this article.